• Audere Research

Weekly FX Outlook October 5th



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GB Pound

Sterling had a positive week.

Movements

GBPUSD opened at 1.2789 and initially appreciated on Monday to reach 1.2920, before consolidating around 1.29 area and closing the week higher by 1.13% at 1.2933.

GBPEUR moved broadly sideways, opening at 1.0999 and trading most of the week in a relatively tight range (1.0950-1.1050) closing little changed at 1.1020 (+0.19%).

Movement rationale

Sterling appreciated strongly on Monday amid rising Brexit hopes as the ninth round of Brexit negotiations commenced. While EU sources reportedly welcomed UK fishing concessions and efforts to make a compromise, they also warned that a large gap remained, particularly on state aid. As no significant breakthroughs were made, the currency lost its initial momentum. An intensification of the negotiations which officially ended on Friday is expected to take place as both parties agreed the importance of finding a post-Brexit deal. Revised GDP data was also realised, with the UK economy contracted 19.8% in Q2, marginally better than expected.

Week ahead

Developments surrounding Brexit could provoke further GBP volatility, with the following main events also having the potential to influence the markets:

Calendar

Friday 7pm | Industrial Production (Aug), Manufacturing Production (Aug), Gross Domestic Product (Aug)

US Dollar

Movements

EURUSD opened at 1.1627 and steadily appreciated to touch a weekly high on Thursday at 1.1770. It then paused its rally and consolidated around 1.1750 to close the week with a gain of 0.93% at 1.1736

GBPUSD opened at 1.2789 and initially appreciated on Monday to reach 1.2920, before consolidating around 1.29 area and closing the week higher by 1.13% at 1.2933.

Movement rationale

The Dollar kicked off on a weak note, amid improved sentiment and revived hopes for an additional stimulus package from US Congress that led investors into riskier assets. The US House of Representatives eventually passed the Democrats $2.2tn relief package. News on Friday that US President Donald and the First Lady were tested positive for COVID-19 prompted a broad return to safe haven assets, with the USD recovering part of previous losses. On the data front released on Friday, non-farm payroll employment rose by 661K in September, almost 200K less than expected with unemployment rate falling to 7.9%,

Week ahead

USD is expected to have a relatively volatile week ahead, with the following main events having the potential to influence the markets:

Calendar

Monday 3pm | ISM Services PMI (Sep)

Tuesday 3:40pm | Fed's Chair Powell speech

Wednesday 7pm | FOMC Minutes

Thursday 1:30pm | Initial Jobless Claims (Oct 2)


Euro

The Euro had a quiet week.

Movements

EURUSD opened at 1.1627 and steadily appreciated to touch a weekly high on Thursday at 1.1770. It then paused its rally and consolidated around 1.1750 to close the week with a gain of 0.93% at 1.1736

GBPEUR moved broadly sideways, opening at 1.0999 and trading most of the week in a relatively tight range (1.0950-1.1050) closing little changed at 1.1020 (+0.19%).

Movement rationale

The Euro had a relatively quiet week. The main headline came from a weaker-than-expected Eurozone consumer price index, falling to 4-year low of -0.3% on the year, officially placing the Eurozone into deflation and intensifying pressure on the ECB to consider injecting more monetary stimulus. The market is now expecting that the ECB to increase the size of its €1.35tn emergency bond-buying programme in December. Consumer and business confidence also show the smallest of improvements for 5 months (although faster than expecting) adding to signs that the pace of recovery is losing momentum.

Week ahead

The Eurozone economic data calendar includes the following:

Calendar

Monday 10am | Retail Sales (Aug), Markit PMI Composite (Sep)

Tuesday 2pm | ECB's President Lagarde speech

Wednesday 7am | Germain Industrial Production (Aug)


Call +44 (0) 203 884 992 to discuss further with an advisor.

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